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Proposal to Split Netflix’s Chairman and C.E.O. Roles Fails

By Michael J. de la Merced June 9, 2014 3:49 pmJune 9, 2014 3:49 pm

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Reed HastingsCredit Paul Morigi/Getty Images for Netflix

New York City Comptroller Scott M. Stringer had hoped that huge support for a proposal last year to split Netflix‘s chairman and chief executive roles would have carried over to this year’s shareholder election.

His fellow shareholders in the online video giant, however, didn’t follow this time around.

Investors in Netflix voted down the proposal at the company’s annual meeting on Monday. A preliminary tally shows that 53 percent of shares were voted against the proposal, according to a company spokesman, nearly double from about 27 percent last year.

And Reed Hastings, who holds both the chairman and chief executive roles, was comfortably re-elected as a director with about 74 percent of voted shares. Both Mr. Stringer and Calpers, the enormous California public pension fund that had partnered with him, had indicated that they would vote against him, as well as the other two directors seeking re-election this year.

Together, Mr. Stringer and Calpers control about 350,000, out of an estimated 60 million shares outstanding.

The results are a blow to Mr. Stringer’s effort to impose what he has called good corporate governance practices at Netflix. Dividing the chairman and chief executive roles increases independence at the board level and ensures that directors aren’t improperly swayed by management, or so the argument goes.

Behind this year’s push was a seeming groundswell of support for such a split last year. Two influential shareholder advisory firms, Institutional Shareholder Services and Glass, Lewis & Company, also endorsed the effort, and additionally recommended that shareholders withhold their votes for Mr. Hastings and the other two directors.

Netflix has an independent lead director, though that position is elected by the full board, not by the company’s other independent board members. The online video provider itself has argued that a “one-size-fits-all” approach to governance isn’t appropriate, and can point to a healthy 92 percent rise in its stock price over the past 12 months as a sign that business is pretty good right now.

In a statement, Mr. Stringer said: “Netflix is the latest company to twist the independent share vote into a referendum on the C.E.O. That’s unfortunate for Netflix and its shareowners. Reed Hastings may be a terrific C.E.O., but he shouldn’t also chair the board to which he answers.”

Netflix declined to comment further.

Separately, Netflix said on Monday that it would stop showing error notifications blaming Internet service providers for slow service. The messages had drawn an aggressive rebuke from Verizon, which had protested that such notices laid the blame at the feet of the wrong party.

In a corporate blog post, a representative for the video service wrote only that the company’s testing of various Internet providers’ speeds would conclude on June 16, and that telecom companies were still improperly charging content providers for acceptable network access.

A version of this article appears in print on 06/10/2014, on page B7 of the NewYork edition with the headline: No Split.